Central Huijin Investment Ltd was given approval to undertake trade on the interbank bond market, which provides government with another method supporting the nation's lenders, a Bloomberg report said. A sovereign investor, Central Huijin Investment has stakes in the largest lenders in China.

Citing a statement posted on a website of the China Foreign Exchange Trade System, Chinamoney.com.cn, the report said the authorization was given to the investor by the Shanghai office of the People's Bank of China. One of Central Huijin holdings is in the world's most profitable lender, Industrial & Commercial Bank of China Ltd.

According to the report, the fund would now be able to access a market where outstanding bonds were already worth CNY 25.7 trillion yuan or USD 4.2 trillion in October. The amount represented three times the value from five years ago. The approval would also enable Central Huijin to purchase the subordinated bonds of banks. China Securities Co fixed-income analyst Dong Hui said the purchase includes the probability of a writedown.

In a phone interview with Bloomberg, Dong said, "Huijin is not your traditional investor -- its purpose has always been to support government policies. Subordinated bonds with the writedown feature haven't been well received by the market."

This year, the four largest commercial lenders in China had unveiled plans to offer junior bonds worth up to CNY 230 billion. Junior bond holders only get paid after senior bondholders in case a company goes bankrupt. The value of the debt can also be lowered if there are financial difficulties faced by the issuer.

Just two days ago, the Chinese government also outlined rules regarding the trading of certificates of deposits on the interbank market. The report said this paved a new way for banks to raise funds while the government prepares to put an end to the limits on interest that banks can pay on savings.